Election 2017 Live: National digs deeper on ‘fiscal hole’

With 18 days to go until the election, National is standing by its fiscal hole claims in the face of widespread disagreement about its allegations

Despite a plethora of economists and financial commentators lining up to debunk his claims, National campaign manager Steven Joyce is stubbornly standing by claims of an $11.7 billion hole in Labour’s fiscal plan.

Comments from a range of independent experts suggest Joyce is wrong to speak about a “fiscal hole” - although correct to acknowledge that Labour will face pressures on spending outside of health and education.

Joyce’s allegations, first made on Monday in the lead-up to the second leaders’ debate, have led Labour leader Jacinda Ardern to accuse him of “a deliberate attempt to mislead the public”.

The Finance Minister claimed Labour had failed to account for extra inflationary costs such as wage increases, neglecting to cumulate the spending from one year to the next.

However, Labour finance spokesman Grant Robertson said Labour had accounted for cost pressures of wage inflation and an ageing population in health and education in its “above the line” spending, rather than in the operational allowance.

In a follow-up statement and media conference on Tuesday, Joyce seemed to concede the education and health sectors had been properly costed, but claimed there were still gaps in allowances for increases to salaries or departmental budgets outside of education and health.

“It’s either they’ve mucked up the allowances and there’s an $11.7 billion hole, or they’ve just ignored the expenditure they have to make over the next four years, and that’s also an $11.7 billion hole.”

Experts line up against Joyce

However, Joyce is largely alone in his claims, with a range of economic experts and financial commentators saying there was no hole.

ANZ chief economist Cameron Bagrie, BERL executive director Dr Ganesh Nana, former NZIER economist Shamubeel Eaqub, Spinoff economics and data journalist Keith Ng, NZ Initiative research fellow Sam Warburton and Stuff political reporter Vernon Small have all said National is wrong or has significantly over-reached in its claims.

The Taxpayers' Union, a right-wing lobby group, told Newshub it believed there was a hole - but not $11.7b as Joyce has claimed.

Where there is agreement is that Labour may struggle to cover any inflation in spending outside of education and health.

A table put together by Labour and assessed by BERL, the consultancy which independently reviewed the party’s fiscal plan, shows that Labour will indeed have less unallocated funds than National on average.

While it would have $121m more than National in the 2018/19 fiscal year, it would have $521m less in 2019/20 and $655m less in 2020/21, before having $798m more in 2021/22.
That could put pressure on Labour to cut spending or find efficiencies to cover any unanticipated costs - a fact acknowledged by Robertson to Newsroom on Monday.

Tax attacks continue

National has renewed its tax attacks on Labour, with Prime Minister Bill English raising the spectre of a land tax following Labour leader Jacinda Ardern’s comments on the matter.

Ardern has come under fire for refusing to elaborate on what new taxes the party could implement if elected to Government, saying an expert working group would consider a range of options before reporting back.

She has previously indicated a possible capital gains tax would include an exemption for family homes.

Speaking on RNZ’s Morning Report today, Ardern was pressed on whether she would implement a land tax, and if so whether it would apply to family homes.

She said “nothing we’re looking at will affect a family home”, but appeared to confuse host Guyon Espiner when talking about a land tax applying differently than a capital gains tax.

“I’m not going to go into the detail of what our expert working group is going to be able to do themselves - they may actually come back and say as I've said before that what we’ve got in New Zealand is sufficient with our extension of the bright line test but they may not.

“They are going to survey all of the options, I am going to consider all of the options.”

Asked by Espiner to reconfirm her position, she ruled out a land tax affecting the family home.

However, English told media at a Petone retirement village Labour needed to be clearer about its position on tax so Kiwi voters could be fully informed.

“You take a group like this, superannuitants all own their own houses, a lot of them own their own houses, but they don’t have much income.

“They already pay rates and now the Labour leader is floating the idea that there’ll be a land tax on top of your rates.

“New Zealanders need to know what they mean by that, otherwise Labour is asking for New Zealanders to give them a blank cheque, that is, ‘Vote us in and we can think of any tax at any rate and you have to pay it, and by the way what we’re spending it on we can’t really show it will make any difference’.”

National’s own tax working group recommended a land tax back in 2009, but the party chose not to implement it.

Robertson later told Newsroom Labour's Tax Working Group would look at the balance of how assets and wealth were taxed, as well as income.

"We are not ruling in things or ruling out things, so it is completely untrue to say. We have no plan for a land tax but we want to listen to the working group about how we create that balance," he said.

"Obviously with the family home we want to make sure we protect that – but if we are going to do this properly we actually have to look at all of the options, that’s what they are doing," he said.

Robertson said National was scaremongering and a TVNZ poll published this week showed the public were interested in the idea of a capital gains tax.

"We are saying that the tax system is not fair and the direction of travel is there – we are extending the bright line out to five years. So I just think National is just trying to whip up a bit of fear here. But actually I think from that poll we can see that many New Zealanders actually understand."

Labour leader Jacinda Ardern has matched National's pledge on child poverty, made during last night's debate. Photo: Supplied by Newshub

Labour to match poverty pledge

In the same interview, Ardern confirmed Labour would match English's surprise poverty pledge from the leaders' debate on Monday night.

English appeared to blindside Ardern, a staunch children’s advocate, with a promise to lift 100,000 Kiwi kids out of poverty during the next term of Parliament.

The Prime Minister said half of that goal would be achieved when National’s family support package launched next April, with the remainder taking place over the next two years.

In response, Ardern said reducing child poverty was “my entire reason for being in politics”, but her own goal appeared less ambitious: matching the Children’s Commissioner’s request to reduce material deprivation by 10 per cent.

"We can lift up about 50,000 as well, when it comes to the extra 50,000 that is something that we of course will have to set targets around in government," she told RNZ.

"He said he'll do 50 [thousand] based on his tax package, the extra 50 [thousand] I'm assuming that means he's going to have another tax package.

"If that means he's going to only target low-income families, look, that's positive. I believe we can match that."

Following up on the issue with media in Auckland, Ardern said English's target was "to be applauded", although she still had questions about how exactly the Government was defining its goal.

"It has taken nine years of course given we’ve been asking for it for some time...[but] it would be wrong of me having asked about it for so long not to say thank you for finally setting some goals in this area."

Another close debate

The child poverty target was just one piece of news to come out of last night’s Newshub debate, with the leaders snapping at each other as a rambunctious studio audience looked on.

Ardern hit English on housing and wages, while the PM struck back on Labour’s vague tax plans and immigration cutbacks.

The alleged $11.7 billion “hole” in Labour’s books came up, with English standing by his Finance Minister Steven Joyce’s allegations despite their debunking by a number of commentators (including Newsroom Pro editor Bernard Hickey).

Hickey said Ardern and English were both winners on the night, with the Labour leader shaking off her first debate nerves and the Prime Minister showing his substance.

“It was the best political debate I can recall in my time covering politics over the last five elections.”

"Edge. Not embarrass or overwhelm. Ardern was more combative than last Thursday and delivered some of her best lines on National's time being up. Hand over the keys, old man."

Elective surgeries boost

National has followed up English’s strong performance with a pledge to increase the number of elective surgeries to 200,000 a year.

Health Minister Jonathan Coleman said access to elective surgery had increased every year under National, rising from 118,000 a year in 2008 to a likely 178,000 this year.

“Elective surgery makes a real difference to patients and their families – it reduces pain, restores independence and improves quality of life.”

Coleman said National would increase the number of elective surgeries by an average of 5500 each year to meet the 200,000 target, with $30 million of funding each year to meet that goal.

However, the Government has been attacked by Labour for allegedly inflating its elective surgery numbers through eye injections originally carried out by nurses and GPs - a claim rejected by Coleman.

Coming up

Ardern is in Auckland for an announcement on Labour’s plans to get young people into trades training, and is also making a visit to Te Puea Marae.

English is heading to the Wairarapa this afternoon for a series of walkabouts and visits to small businesses.

NZ First leader Winston Peters is heading to a public meeting in Kerikeri as he seeks to hold onto his Northland electorate.

(Updated 8 pm)

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